Restoring Your VA Loan Entitlement or Using Remaining Entitlement
If you have already used your VA loan benefit to purchase a home, then some or all of your entitlement is tied up in that property. So, what happens if you wish to buy another home to move into (must become your primary residence) and want to use that VA loan benefit again? Well, you are going to need some entitlement, and here are a few ways to get it:
1. Sell your current home (that you already used the VA loan for) and pay off the VA loan that was tied to it. Voila! Entitlement has been restored for another use.
2. Let another veteran assume your current VA loan. Another veteran can substitute their entitlement for yours, assuming they meet loan qualification requirements.
3. You didn’t use all of your entitlement on the first home and have some remaining. If you are not planning to pay off the original VA mortgage attached to the first home before buying another, the original entitlement will remain tied to that first home and cannot be freed up. However, if you did not use all of your allotted entitlement on that first home, whatever is left can be applied toward the acquisition of another primary residence. This likely means you will need to have a bit of down payment if the amount of the remaining entitlement is not enough to cover 25% of the home’s value. As a general rule, entitlement plus down payment/equity must cover at least 25 percent of the home value.
4. You paid off the original VA loan but still own the property. Get a one-time restoration of entitlement. The VA does not want you to use the VA loan benefit to build an investment portfolio. Therefore, they typically require that you dispose of a property that had a VA loan tied to it before acquiring another one. However, there are cases where a veteran is in transition and wants to purchase another home but may not be able to dispose of the original home before completing the second purchase. VA will allow a one-time restoration of entitlement for cases like these. Once you have used your one-time restoration, your Certificate of Eligibility will be updated to indicate the one-time restoration.
If you are planning to make another home your dream home, plan ahead and consider the options above.